(The following statement was released by the rating agency) Fitch Ratings-Sydney-December 18: Fitch Ratings has upgraded two and affirmed 10 classes of asset-backed floating-rate notes from six SMART ABS Series transactions. The transactions are securitisations of Australian automotive, equipment and consumer-finance receivables originated by Macquarie Leasing Pty Limited. All Notes were issued by Perpetual Trustee Company Limited in its capacity as trustee. The ratings were upgraded due to better than expected asset performance. SMART ABS Series 2016-1 Trust ----A AU3FN0030953; Long Term Rating; Affirmed; AAAsf; RO:Sta ----B ; Long Term Rating; Affirmed; AAAsf; RO:Sta SMART ABS Series 2017-2 Trust ----A AU3FN0037081; Long Term Rating; Affirmed; AAAsf; RO:Sta ----B ; Long Term Rating; Affirmed; AAsf; RO:Sta SMART ABS Series 2016-3 Trust ----A AU3FN0033320; Long Term Rating; Affirmed; AAAsf; RO:Sta ----B ; Long Term Rating; Upgrade; AAAsf; RO:Sta SMART ABS Series 2019-1 Trust ----A AU3FN0047106; Long Term Rating; Affirmed; AAAsf; RO:Sta SMART ABS Series 2017-1 Trust ----A AU3FN0035309; Long Term Rating; Affirmed; AAAsf; RO:Sta ----B ; Long Term Rating; Upgrade; AAAsf; RO:Sta SMART ABS Series 2016-2US Trust ----A-3a 83191GAD1; Long Term Rating; Affirmed; AAAsf; RO:Sta ----A-4a 83191GAF6; Long Term Rating; Affirmed; AAAsf; RO:Sta ----B ; Long Term Rating; Affirmed; AAAsf; RO:Sta KEY RATING DRIVERS Obligor Default Risk: Obligor default and recovery rates are key assumptions in Fitch's quantitative analysis. The performance of the underlying assets has been better than Fitch's base-case expectations with minimal net losses. Fitch has revised the base case remaining default rate since the last review to SMART ABS Series 2016-1 Trust: 0.98% (from 1.15%) SMART ABS Series 2016-2US Trust: 1.04% (from 1.15%) SMART ABS Series 2016-3 Trust: 1.18% (from 1.35%) SMART ABS Series 2017-1 Trust: 1.37% (from 1.55%) SMART ABS Series 2017-2 Trust: 1.78% (from 1.64%) SMART ABS Series 2019-1 Trust: 2.33% (from 2.69%) The recovery rates were maintained at Novated leases: 50% Non-novated leases: 45% Consumer: 25% Trucks: 40% Equipment: 20% The AAAsf default multiples were maintained at Novated leases: 7.20x Non-novated leases: 6.00x Consumer: 5.75x Trucks: 5.50x Equipment: 5.75x SMART 2019-1 had the lowest level of 30+ day arrears of 0.6% at end-September 2019, while SMART 2016-1 and SMART 2016-2US had the highest levels at 1.9%. Macquarie Leasing's arrears did not include loans with current hardship status that are not in arrears. 30+ day arrears across all trusts tracked below the 3Q19 Fitch Auto ABS Dinkum Index of 2.0%. Cumulative gross losses were low, ranging from 0.1% for SMART 2019-1 to 1.8% for SMART 2016-1. Cumulative net losses were also low, ranging from 0.1% for SMART 2019-1 to 1.2% for SMART 2016-1. Fitch expects asset performance to remain stable, supported by Australia's sustained economic expansion of 2.3% in 2020, together with a steady labour market and a low interest environment. Cash Flow Dynamics: All transactions except SMART 2019-1 are currently paying pro rata with a switch to sequential paydown only after the first call option date. Fitch completed full cash flow modelling for SMART 2016-3, SMART 2017-1 and SMART 2017-2 in this review, and determined that full and timely payment of principal and interest was made to the notes in all cash flow modelled scenarios at the proposed rating levels. No cash flow model was completed for SMART 2016-1, SMART 2016-2US or SMART 2019-1 as the current outstanding ratings are 'AAAsf' with no potential for upgrade or benefit from better-than-base-case expectations. In addition, none of the variables affecting transaction performance have changed beyond our expectations at the last review and credit-enhancement levels are unchanged or have moved in line with expectations. Structural Risk: Structural risks have been evaluated in the initial transaction analysis through the review of transaction documentation, legal opinion and structural features. There have been no material changes to any transaction since closing. Counterparty Risks: Counterparty risks have been evaluated in the initial transaction analysis through the review of transaction documentation, legal opinions and structural features. There have been no material changes to any transaction counterparties since closing. Servicer, Operational Risk: All assets were originated by Macquarie Leasing, which is a wholly owned subsidiary of Macquarie Bank Limited (A/Stable/F1). Fitch undertook an onsite operational review and found that the operations of the servicer were comparable with other auto and equipment lenders. Residual Value Risk: There are no residual value positions in the portfolio. There is refinancing risk in the transactions, as in each trust over half of the remaining outstanding contract balances have balloon contracts. Refinancing risk on loans with a balloon payment has been considered in the default multiples. RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, which is likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Fitch does not expect the ratings to be affected by any foreseeable change in performance in either trust. The prospect of downgrade is remote, given the level of subordination to the rated notes and transaction performance. Where models were run, Fitch conducted sensitivity analysis by stressing the transaction's base-case assumptions. The results of rating-sensitivity testing are shown below. SMART 2016-3 Notes: A/B Rating: AAAsf/AAAsf Impact upon the note rating of increased defaults: Increase defaults by 10%: AAAsf/AAAsf Increase defaults by 25%: AAAsf/AAAsf Increase defaults by 50%: AAAsf/AA+sf Impact upon the note rating of decreased recoveries: Reduce recoveries by 10%: AAAsf/AAAsf Reduce recoveries by 25%: AAAsf/AAAsf Reduce recoveries by 50%: AAAsf/AAAsf Impact upon the note rating of multiple factors: Increase defaults by 10%; reduce recoveries by 10%: AAAsf/AAAsf Increase defaults by 25%; reduce recoveries by 25%: AAAsf/AAAsf Increase defaults by 50%; reduce recoveries by 50%: AAAsf/AA+sf SMART 2017-1 Notes: A/B Rating: AAAsf/AAAsf Impact upon the note rating of increased defaults: Increase defaults by 10%: AAAsf/AAAsf Increase defaults by 25%: AAAsf/AA+sf Increase defaults by 50%: AA+sf/AAsf Impact upon the note rating of decreased recoveries: Reduce recoveries by 10%: AAAsf/AAAsf Reduce recoveries by 25%: AAAsf/AAAsf Reduce recoveries by 50%: AAAsf/AAAsf Impact upon the note rating of multiple factors: Increase defaults by 10%; reduce recoveries by 10%: AAAsf/AAAsf Increase defaults by 25%; reduce recoveries by 25%: AAAsf/AA+sf Increase defaults by 50%; reduce recoveries by 50%: AA+sf/A+sf SMART 2017-2 Notes: A/B Rating: AAAsf/AAsf Impact upon the note rating of increased defaults: Increase defaults by 10%: AAAsf/AA-sf Increase defaults by 25%: AA+sf/A+sf Increase defaults by 50%: AA-sf/Asf Impact upon the note rating of decreased recoveries: Reduce recoveries by 10%: AAAsf/AAsf Reduce recoveries by 25%: AAAsf/AAsf Reduce recoveries by 50%: AA+sf/AA-sf Impact upon the note rating of multiple factors: Increase defaults by 10%; reduce recoveries by 10%: AA+sf/AA-sf Increase defaults by 25%; reduce recoveries by 25%: AA+sf/A+sf Increase defaults by 50%; reduce recoveries by 50%:A+sf/BBB+sf USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio as part of its ongoing monitoring. Prior to SMART 2016-1's closing, Fitch did not review the results of a third-party assessment conducted on the asset portfolio information. For the remaining transactions prior to their closing, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was available for these transactions. As a part of its ongoing monitoring, Fitch conducted a file review of a small targeted sample of Macquarie Leasing's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: - Issuer and servicer reports at end-September 2019 provided by Macquarie Leasing. - Loan-level data at end-September 2019 provided by Macquarie Leasing. - Discussions and updates from Macquarie Leasing in October, November and December 2019. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. ESG Considerations Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on these six SMART trusts, either due to their nature or the way in which they are being managed by Macquarie Leasing. For more information on our ESG Relevance Scores, visit www.fitchratings.com/esg. Contacts: Surveillance Rating Analyst Eugene Wang, Analyst +61 2 8256 0373 Fitch Australia Pty Ltd Level 15 77 King Street Sydney NSW 2000 Committee Chairperson Chris Stankovski, Senior Director +61 2 8256 0341
Media Relations: Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com; Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria Consumer ABS Rating Criteria (pub. 11 Dec 2019) https://www.fitchratings.com/site/re/10101290 Fitch Ratings Interest Rate Stress Assumptions for Structured Finance and Covered Bonds (Excel) (pub. 06 Dec 2019) https://www.fitchratings.com/site/re/10104368 Global Structured Finance Rating Criteria (pub. 02 May 2019) https://www.fitchratings.com/site/re/10073280 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 18 Apr 2019) https://www.fitchratings.com/site/re/10068780 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 18 Apr 2019) https://www.fitchratings.com/site/re/10069072 Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 06 Dec 2019) https://www.fitchratings.com/site/re/10103887 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10103603 Solicitation Status https://www.fitchratings.com/site/pr/10103603#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2019 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the "NRSRO"). While certain of the NRSRO's credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see https://www.fitchratings.com/site/regulatory), other credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO.